In the wake of legislation already freezing the GSA real estate footprint, new policy is floating around Capitol Hill that would require the federal government to move away from its current leasing-centric model. On the surface, this seems like a smart strategy, as the federal government is continually challenged to be more effective when it comes to managing resources.
However, the reality is that this type of effort could be a bad thing from a tax perspective. The federal government currently leases space at more than 8,100 unique locations throughout the United States, with an implied real estate value in excess of $75 billion. If the federal government mandated a reduction in leased space by a mere 15 percent, the property tax losses alone could result in lasting damage to states and small towns across the U.S. that rely on these taxes to fund necessary services.
Simply put; a tax loss of this magnitude, and its subsequent economic ripple effect could cause our nation to slide back into the deep recessionary levels we experienced in 2008 and 2009.
These are some of the key insights from a recent SC&H podcast interview with Ross Litkenhous, Principal with SC&H Group, who provides a macroeconomic view of how the loss of property taxes from a federal policy shift — a cutback in GSA leasing specifically — will lead to unintended consequences.